Since mid-February, the price of Bitcoin (BTC) has dropped as much as 26%. However, according to TradingView data, Bitcoin remains up year-to-date with a gain of nearly 13%.
This performance notably outpaces many traditional assets that have recently plunged. Stock markets have been heavily affected by the global spread of the coronavirus across many industries, creating a significant threat to the world economy.
For example, year-to-date the Dow Jones has fallen more than 14%, the S&P 500 about 12% and the Nasdaq roughly 9%. European indices have suffered even steeper declines: the CAC 40, EuroStoxx and FTSE have each lost close to 20%. The S&P 500 volatility index has surged over 260%, illustrating the high levels of fear and uncertainty among investors.
Learn the definition of volatility in this short 2-minute video.
Ari Paul, managing partner at BlockTower Capital, commented on Bitcoin’s bullish price action throughout 2020 in a recent tweet. He observed that while stocks are down 15% or more from their start-of-year levels, Bitcoin remains up over 7%.
“BTC is not (yet) a safe-haven. I always expected it to drop during a broad unwind of equities. Honestly, I’m quite surprised by how well it has held up. BTC is up more than 7% on the year while stocks are down about 15%. We’ll see what happens, but that’s a pretty impressive performance for a risk asset,” he said.
Will Bitcoin Stage a Sustainable Rebound?
Gold-focused investor Peter Schiff believes it would be wiser to avoid holding BTC right now. He argues that the extreme price volatility, along with uncertainties from the coronavirus and the price war hitting the oil market, should have supported the price of the leading cryptocurrency—but they have not.
“If Bitcoin can’t recover with an emergency 50 basis point cut in US interest rates—let alone amid recent volatility across equities, bonds, currencies and gold—under what circumstances will it recover? If Bitcoin’s value does not rise, why hold it? The answer, in my view, is to sell,” Schiff wrote on Twitter.
Today, Bitcoin appears to be moving in step with traditional assets that are staging a bounce. BTC is trading more than 2% higher, sitting just above $8,100 at the 61.8% retracement level of the mid-December to mid-February price rise. The fundamentals supporting Bitcoin’s long-term recovery look reasonably solid.
For example, mining difficulty has risen strongly since the start of the year, as shown in the chart below. Higher mining difficulty reinforces the security and resilience of the Bitcoin network.
Despite the recent sharp drop in prices, Bitcoin and certain altcoins have outperformed many traditional assets such as stock indices and equities.
Some investors and analysts even argue that every investor should hold a portion of their portfolio in cryptocurrencies. Chamath Palihapitiya, chairman of Virgin Galactic, recommends that all investors allocate about 1% of their net worth to Bitcoin.
What do you think? Is it worthwhile to hold Bitcoin now? Will prices rebound?